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Tuesday, July 19, 2005

Taylor and Van Doren on the Energy Bill
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Jerry Taylor and Peter Van Doren of Cato have the Energy Bill analyzed just about right in National Review Online, with two exceptions. Taylor & Van Doren argue that provisions relating to power line siting and liquified natural gas (LNG) terminal siting override state and local autonomy, and thus should be opposed by conservatives. In essence, these provisions give federal regulators' authority to site power lines and LNG terminals, respctively.

In truth, these are among the more salutary portions of a decidedly mixed bill. The holdout problems inherent in siting at a local level are enormous, and the political dynamics give enormous leverage to coalitions of NIMBY and environmentalist groups to slow roll or kill needed tranmission projects. Furthermore, when you are talking about electricity transmission or natural gas supply, these are truly inter-state services. A siting decision in one jurisdiction can affect energy prices regionally. The same goes for LNG terminals, which would help mitigate the volatility in natural gas prices by bringing on more reliable supply.

States have actually been experimenting with this "preemption" authority over local siting decisions to good effect. A few years ago, Colorado gave the PUC authority over electric-line siting, a job that had formerly been one of "local control." The PUC has used this power judiciously to order the upgrade of needed transmission capacity to meet growing demand.

The most recent case illustrates the political economy problems of "local control." The line, proposed by a rural electric co-op, was needed to upgrade capacity and ensure reliability in southwestern Colorado to poorer, more rural farming communities. But it's path ran through Telluride, home of Hollywood stars and other well-to-do second home owners. The Telluride residents wanted to block the line or force it to be undergrounded, which would quintuple the cost (to be paid for by all ratepayers, not just them). The PUC overrode the local authority, ordering the line to be upgraded. This was a good overall result and the state preemption overrode the parochial politics of local decisionmaking.

My point is that Taylor and Van Doren over-idealize the process of local control. It is very often, to use a phrase, the powerful sticking it to the little people; or, a forum where a highly energized group of environmentalists can quite cheaply and easily have their way. This is not to go to the other extreme and praise the federal regulatory oversite unduly either. On the whole, I think a federal role in siting could be very constructive to help move along necessary upgrades to the nation's electric and natural gas system.

Despite these differences, Taylor and Van Doren are exactly right on the additional grotesqueries of the bill: the giveaways to fanciful technologies; the mandates that will increase consumers energy costs; the preference for vanity energy projects that make people feel good about themselves but do little for efficiency or long-term innovation. I join them in their ambivalence toward the bill. Is PUHCA repeal and these siting authorities worth all of the costly giveaways and mandates? On this balance, I probably cast my lot with Taylor and Van Doren.

posted by Ray Gifford @ 11:47 AM | Electricity

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